Allowing YMIL's appeal, a bench comprising S S Kang and Rakesh Kumar held that the free after-sales- service offered by the company during the warranty period was not a part of 'assessable value', on which duty is paid.
The excise officials has slapped a duty demand of Rs 1.5 crore and also imposed a penalty of the same amount on YMIL after they found that the company was reimbursing Rs 70 per service to its dealer for providing after-sales-service.
The case dates back to a period between July 2002 and December 2003, when YMIL launched a scheme to provide free services during the warranty period and was reimbursing its dealers for it.
According to the officials, these amount was not added in the 'assessable value' of the bike and hence it resulted in short payment of the duty by YMIL.
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The department imposed a penalty on YMIL under the Central Excise Rules, 1944 and Central Excise Valuation Rules on the grounds that it "deliberately suppressed" the information regarding the after sales service.
YMIL challenged the direction before the the Custom Excise and Service Tax Appellate Tribunal (CESTAT) on the grounds that the company was not reimbursing amounts charged by the dealers for any such services. The money given to the dealers was already included in the assessable value of the bikes.
The company also contended that since it was selling the bikes below its cost price during that period, it could not have included the service charges in that.